News Flash! Water still runs downhill only

Today’s Los Angeles Times reports that “Businesspeople join the ranks of climate treaty proponents.” This support is old news as I noted last May in a post entitled “Water does not run uphill.” The L A Times report nevertheless express surprise saying, “an unlikely batch of advocates has emerged to champion a new global warming agreement: businesspeople.” And yet the same article contains clear statements that many big businesses see profit opportunities in a climate treaty.

Climate laws are barriers to entry. Thus, the profit opportunities should be greatest for the biggest businesses and for the energy sector, lowest or non-existent for other business interests. The story gives evidence supporting this inference. Coca-Cola supports a treaty, the need for which represents the “consensus of oil and gas executives.” The US Chamber of Commerce, however, opposes emission limits before Congress and expresses caution regarding a global climate treaty. The US Chamber of Commerce represents a large number of very different business interests and businesses of different sizes. Thus, it tends to support positions such as free trade and oppose measures such as the prospective climate change treaty being discussed in Copenhagen.

This analysis does not say anything about the reality of global warming or whether warming is anthropogenic. But it should disabuse anyone of the notion that big business has acquired a social conscious. Water does not run uphill. Business support for a climate treaty reflects not social conscious, but careful calculations of profit and loss.

Cap and trade is indeed a way for an imcumbent to benefit from a barrier to competition, but there’s another even more sinister effect that is highlighted in the Dec. 21 issue of Bloomberg Business Week, “China’s Carbon-Credit Hustle” (pp. 18-20), namely that firms can get subsidies for investment projects that would have been built absent these windfalls. And the payments are to some extent forked over from taxes paid by competitors.
Firms can game the carbon-offsets system and engage in rent seeking by recalculating expected profits from these investments so that they come in under government-mandated levels. If the magic level is 8%, but a firm would have undertaken an investment and earned 8%+, then, viola, all it has to do to qualify for a subsidy is recalculate the rate of return to come in at under 8%.

You endorsed cap and trade in your previous post; let me put my libertarian credentials on the line by opposing it.
The problem will be solved on the market, and for a profit, thanks to innovation and investment, or it won’t be solved.

Socialists will never absorb Horwitz First Law, which says, “no one hates capitalism more than capitalists.” The Los Angeles Times article includes the following passage, which reveals quite a bit about many, though by no means all, climate activists.

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The big-business side to the talks has angered some climate activists, who decry “green capitalism” and call for massive wealth transfers from the richest nations to developing countries struggling to cope with climate change. One speech Friday at Klimaforum09, a parallel gathering of environmentalists, was titled “Global Warming: the Capitalist Catastrophe and the Eco-Socialist Alternative.”
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To grasp Horwitz’s first law, you must understand the difference between being pro-business and being pro-competition. Too bad that’s so difficult for so many!